Motor vehicle prices to fall amidst VAT confusion

Motor traders say that new tax system enforced in the budget should be clearly clarified in a gazette notification for them to determine the price of the vehicle although there will be a definite price reduction in all motor vehicles.

Under the budget, five types of taxes have been replaced. There will be a single tax instead of VAT, NBT, Cess, Customs Duty and Ports and Airport Development Levy (PAL). The VAT at the import and the selling point has been removed, President of the Ceylon Motor Traders' Association, Gihan Pilapitiya told the Business Times The prices of small vehicles will reduce by 10 per cent and other vehicles by 8 per cent but the price of trucks (commercial vehicles) will go up by 7 per cent under the new tax system, he disclosed, adding that the Treasury should clarify this through a gazette notification. He said a large number of people who purchase vehicles by leasing will have to pay more for their installments as the leasing companies will not be able to claim input VAT since VAT is removed at the import point.

This proposal is beneficial for rich people who buy luxury vehicles paying ready cash, he said.

There will be marked reduction of around. Rs.200,000 to Rs. 300,000 in the prices of motor cars and vans under the below 1000 cc engine capacity due to the introduction of the new tax which has been reduced to around 173 per cent from 202 per cent. He added that though there could be a slight downward trend in the prices of hybrid and Japanese cars, the price of super luxury vehicles will come down by Rs. 500,000 to Rs. 600,000. The tax on vans has been reduced to 98 per cent from about 152 per cent.

President of the Lanka Vehicle Importers' Association Indika Sampath Merinchige noted that the cost of a vehicle like a Hiace van will fall by between Rs.1 million and Rs.1.2 million. A flat roof van will cost about Rs. 5 to Rs. 5.5 million, from between Rs. 6.5 and 7 million. He said the prices of other types of vans would reduce by between Rs. 500,000 to Rs.1 million.